Thursday, January 30, 2014

What Happens When The Market Holds A Big Level

It rips.

Yesterday the market had the perfect excuse to break lower and crush the 1767.99 level. It couldn't do it. We're seeing what happens when that occurs. Futures are ripping higher.

The 1801 level, the 38% Fib retracement, is the first objective. Actually, the market needs to break above 1793.78 first to break the falling wedge structure, but if it can close above these levels, there is an interesting volume shelf around 1827-1830.

The Facebook had blow out earnings. It's up 18% in the pre-market which should ignite the animal spirits of the bulls. They are killing it in mobile advertising.

Deflation is a word that central bankers do not like to even say. They choose to dance around it using language such as "inflation that is too low" or "an unwelcome fall in the rate of inflation."

Why do they do this? Because they know it begets a psychological phenomenon of waiting for lower prices, which exacerbates the problem. Therefore they do not want to even utter the word.

Those who think deflation is harmless should listen to the Bank of Japan's Haruhiko Kuroda, who has lived through 15 years of falling prices. Corporate profits dried up. Investment in technology atrophied. Innovation fizzled out. "It created a very negative mindset in Japan," he said.

"Smart, clear, level headed thinking . . . It calms me to read an unbiased assessment of this market by the numbers."

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